Financial Crime World

Puerto Rico’s Financial Watchdog, FinCEN, Bolsters Anti-Money Laundering Efforts

As an unincorporated US territory, Puerto Rico falls under the jurisdiction of several US federal laws, including those related to Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CTF). The primary regulatory body overseeing these matters is the Financial Crimes Enforcement Network (FinCEN).

FinCEN’s Role in Safeguarding Puerto Rico’s Financial System

Based in the US, FinCEN plays a crucial role in protecting the financial system from illegal activities, including money laundering, by:

  1. Gathering, analyzing, and disseminating financial intelligence
  2. Collaborating with domestic and international organizations
  3. Identifying and preventing criminal activities
  4. Protecting national security

FinCEN’s Responsibilities

FinCEN’s responsibilities include:

  1. Collecting, maintaining, and sharing financial data on transactions
  2. Analyzing and disseminating the data for law enforcement
  3. Developing international partnerships
  4. Employing advanced analytical tools to combat threats to the financial system
  5. Supporting investigations and prosecutions of financial crimes

Compliance with AML/CTF Regulations in Puerto Rico

For financial institutions in Puerto Rico, compliance with AML/CTF regulations includes adhering to the:

  1. Bank Secrecy Act (BSA)
  2. USA PATRIOT Act

Bank Secrecy Act (BSA)

The BSA, enacted in 1970, is the primary US law mandating anti-money laundering measures for financial institutions. BSA requirements include:

  • Creating AML programs with proper customer due diligence (CDD)
  • Implementing screening procedures
  • Report-filing
  • Record-keeping

These measures enhance the effectiveness of criminal, tax, and regulatory investigations and prosecutions.

USA PATRIOT Act

Passed in response to the 9/11 terrorist attacks, the USA PATRIOT Act extends the BSA monitoring authorities to law enforcement for terrorism-related offenses. The Act allows federal authorities to access corporate records, share information, and work together to build cases against terrorists.

Creating Comprehensive AML Compliance Systems

To comply with the BSA and PATRIOT Act, financial institutions should create comprehensive AML compliance systems that include:

  • Internal controls
  • Monitoring mechanisms
  • Customer due diligence
  • Customer Identification Programs
  • Currency Transaction Reports (CTR) and Suspicious Activity Reports (SAR) reporting
  • Risk-based anti-money laundering programs

Reporting Requirements

Under the BSA:

  • Financial institutions must report cash transactions above $10,000, using the FinCEN Form 112
  • Submit suspicious activity reports (SAR) for any attempts to circumvent reporting requirements or suspicions of money laundering, terrorist financing, or other criminal activities

Money Services Businesses (MSBs)

Money services businesses (MSBs) providing travelers’ checks, money orders, and money transfer services are also subject to specific reporting requirements.

Reporting Suspicious Activity and Penalties

Financial institutions and their employees must report any unusual behavior that could indicate criminal activity to FinCEN without delay. Failure to comply with AML/CTF regulations may result in severe penalties, including fines and loss of business licenses.

Ongoing Cooperation and Collaboration

FinCEN’s efforts to combat money laundering and terrorist financing in Puerto Rico continue to strengthen the financial sector and contribute to national security objectives. The complex and ever-evolving nature of financial crimes requires ongoing cooperation and collaboration between regulatory agencies, financial institutions, and international partners.